Daily Price Limit: The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange.
Day Order: An order that expires automatically at the end of each day's trading session.
Day Trader: A trader, often a person with exchange trading privileges, who takes positions and then offsets them during the same trading session prior to the close of trading. They look for small profits and offset the positions even in small losses without holding for a long time
Delivery: The transfer of the asset from seller to buyer. This does not necessarily involve physical shipment but can be done on paper with the asset remaining in the designated depository/warehouse/ vaults.
Delta: The proportion by which the price of an option changes in response to a change in the price of the underlying asset. The delta measures the sensitivity of the option's price to changes in the asset's price.
Delivery: The tender and receipt of the actual security/commodity, the cash value of the commodity, or of a delivery instrument covering the securities/ commodity (e.g., depository transfer receipts warehouse receipts or shipping certificates), used to settle a futures contract.
Delivery Date: The date on which the security/commodity or instrument of delivery must be delivered to fulfill the terms of a contract.
Delivery Month: The specified month within which a futures contract matures and can be settled by delivery or the specified month in which them delivery period begins.
Delivery Notice: The written notice given by the seller of his intention to make delivery against an open short futures position on a particular date. This notice, delivered through the clearing corporation, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title.
Delivery Option: A provision of a futures contract that provides the seller or buyer with flexibility to opt for physical delivery or cash settle the open positions at expiry
Derivative: A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., "derived from") the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates). Some of the common forms of derivative instruments are forwards, futures, options, swap, etc.
Electronic Trading: A trading facility that operates by on an electronic platform using telecommunications network instead of a trading floor and maintains an automated audit trail of transactions.
European option: An option that may be exercised only on the date of expiry.
Exchange for Physical (EFP): A mechanism that allows a client to swap the long or short futures contract through the physical/spot market. The differential in the price between the spot and the futures contract is often itself referred to as the EFP.
Exchange Rate: The price of one currency stated in terms of another currency.
Exercise Price (Strike Price): The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer.
Expiration Date: The date on which an option contract automatically expires; the last day an option buyer may exercise the right associated with the option.
Exercise notice: A notice tendered by a brokerage firm to the Clearing Corporation for exercising the right attached to an option.
Exchange-Traded Fund (ETF): An Exchange-Traded Fund (ETF) is an open-ended investment instrument issued by an investment company that trades on a stock exchange. By investing in the components of an index or in the commodity, the ETF makes available to small investors the opportunity to invest in the index or commodity. For example, an ounce of gold may cost $1100.00, but a share in gold ETF may cost $110.00, making it a more viable investment for many more people.
Fill: The execution of an order.
Fill or Kill Order (FOK): An order that demands immediate execution or cancellation. Typically involving a designation, added to an order, instructing the broker to offer or bid (as the case may be) one time only; if the order is not filled immediately, it is then automatically cancelled.
Final Settlement Price: The price at which a cash-settled futures contract is settled at maturity, pursuant to a procedure specified by the exchange.
Fixed Exchange Rate: Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention by the central bank.
First-in-first-out (FIFO): A method of valuing the costs of goods sold that uses the cost of the oldest item in inventory first.
F.O.B. (Free On Board): Indicates that all delivery, inspection and elevation, or loading costs involved in putting commodities on board a carrier have been paid.
Forced Liquidation: The situation in which a customer's account is liquidated (open positions are offset) by the brokerage firm holding the account, usually after notification that the account is under-margined due to adverse price movements and failure to meet margin calls.
Force Majeure: A clause in a supply contract that permits either party not to fulfill the contractual commitments due to events beyond their control. These events may range from strikes to export delays in producing countries.
Forward Market: The over-the-counter market for forward contracts.
Forward Months: Futures contracts, currently trading, calling for later or distant delivery. See Back Months.
Forward Rate: The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract.
Forward contract: A contract entered into by two parties who agree to thefuture purchase or sale of a specified commodity. This differs from a futures contract in that the participants in a forward contract are contracting directly with each other, rather than through a clearing corporation. The terms of a forward contract are negotiated between the buyer and seller, while exchanges set the terms of futures contracts.